Why Does Obamacare Look So Good in New York? Largely Because the Policy Was so Terrible Before

Fans of Obamacare are cheering the massive drop in individual health insurance premiums in New York State. But it should be acknowledged that Obamacare looks so good in the Empire State in part because the health insurance policy that came before it was so bad.

For years New York has had one of the most heavily regulated insurance markets in the country. The 1993 reforms not only required insurers to accept all customers; they also mandated that insurers charge everyone the exact same price. Young or old, healthy or sick, it doesn’t matter in New York: Everyone gets the same deal.

No doubt this policy was an applause line for politicians: We will make the mean, rich insurance companies pay for everyone’s healthcare and not let them have the income stream that would make such coverage sustainable. You won’t need to buy insurance until you are really, really sick and then the fat cats will have to sell it to you cheap and pay all your massive health care costs! That’ll show ‘em, right? Wrong:

New York has, for 20 years now, been a long-running experiment in what happens to universal coverage without an individual mandate. The result: a small insurance market with very high insurance premiums.

New York’s prior law highlights one of politicians’ worst impulses, which is to allow the private sector to have control of some domain and then try to suspend resultant market realities through legislation. If the health insurance companies in New York had not jacked up premiums in response to having to cover all applicants at the same price, they would have gone bankrupt.

Obamacare fixes the problem by being realistic about how markets work. Private companies can provide health insurance for everyone and make a profit doing so (The model in several Western European countries) but only if everyone has to enroll. This was for years a Republican talking point against New York State-style popular-but-economically-crazy health insurance regulation; I myself first heard it at a pre-Obama American Enterprise Institute seminar.

But Obamacare’s appreciation of what markets can and can’t do in the health insurance domain came from within Democratic ranks with no Republican support. Substantive health care policy debate is now something the liberal wing of the Democratic Party engages in with the moderate wing of the Democratic Party because the Republican Party, sadly enough, has largely abandoned the field.